Business Smarts: Small Business Scams

Many of us think scams target individuals, but businesses are all too often the victims. One Columbia business I know of learned this lesson the hard way. Today, they’re out $11,300.
One afternoon, one of two company owners — a smart, successful, self-made business leader in our community — received an e-mail that looked like it came from his business partner, asking that he immediately wire $11,300 to a client. The message said the business partner was stuck in a meeting and that he was e-mailing from his phone, so any typos should be forgiven. It stressed that the money had to be sent quickly.
The person receiving the email wanted to help his partner. He wired money for the company a few times a year, so this request wasn’t completely out of the ordinary.
He quickly drove to the bank and wired the money to an account in another state. He didn’t think about it again until his business partner called, two days later, asking why the money had been wired.
We know the rest of the story. That money is gone. It was moved as soon as it hit the new account. The company will almost certainly never recover it.
This is a fairly common scam that has cost U.S. businesses billions of dollars over the last decade or so. Thousands of small businesses deal with fraudulent or deceptive practices every year. Protecting your business is often just a matter of identifying suspicious situations and asking questions. By teaching employees how to identify common tricks, you can help defend your business against scammers.
Be on the lookout for these and other scams:
 

• “Business opportunities”: Many small business owners are approached to invest in other business opportunities. Promoters may claim that the venture will increase customer traffic or that little effort will be required to earn high profits.

 

• Phony invoices: Scammers know businesses sometimes make mistakes or can be careless in accounting. They prey on these weaknesses. Lifting names from mailing lists, business directories, the web, or published advertisements, scammers send invoices for directory listings or advertising. The invoice may seem genuine to the company’s accounting department, and may even include the name of a company executive as the “authorizing agent.” However, this invoice is a solicitation in disguise and, in very fine print, it probably contains a disclaimer like this one: “This is a solicitation. You are under no obligation to pay unless you accept this offer.” It’s technically illegal to use inconspicuous print like that, but there are those who flout these regulations. Don’t be surprised if these vendors send multiple invoices.

 

• Coupon books: Small businesses are often approached to participate in coupon books. Scams occur when the promoters change the terms of the coupons to make them more attractive to buyers, when the books are oversold, or when the books are not distributed.

 

• Overpayment scams: Sometimes an advance call is made to find out what brand of supplies or equipment a business uses. On a return call, the caller claims to represent a reputable company with which the firm often does business. The caller may state that surplus merchandise is available at a reduced price due to a cancellation or over-order. Accepting this “opportunity” may mean you’re accepting other obligations as well, leaving you with demands for payment and threats to turn your account over to a collection agency or attorney.

 

• Vanity pitch: “Dear Business Executive,” begins the letter. “We would like to include you in our next edition of ‘Top Professionals in the (fill in the blank).’” All too frequently, pitches for “elite professional” publications, or nominations for awards or special memberships, have a catch. The executive, flattered into providing the details of his or her career, may be stuck with a subscription fee, a charge for the listing, or an inflated price for buying a publication that does not receive the widespread distribution implied in the initial offer.

 
The good news is that all of these scams are avoidable. The Better Business Bureau has a few tips to scam-proof your business:
 

• Get everything in writing. Require that all sales pitches for advertising, charity appeals, or requests for your personal information be made in writing.

 

• Refuse to make commitments with the unknown. Refuse deals with unknown sellers, especially over the phone or internet, if you can’t verify the reliability and complaint history of the seller’s business with BBB or other consumer protection agencies.

 

• Institute strict accounting controls. Processing of invoices and billing should be centralized and authorizations should be confirmed.

 

• Comparison shop. Compare product prices, quality, and service with other suppliers when offered a deal from an unknown salesperson or company.

 

• Keep a list of regularly used publications or vendors. Knowing this list will protect your business against scammers who try to take your money by claiming that your company previously used their publication or service.

 
Sean Spence is the regional director of Better Business Bureau Columbia.